The yen is down in an “unwinding of risk-off,” Masafumi Takada, a director at BNP Paribas SA, said in a Bloomberg article. “Japanese yen is being traded as a proxy of risk on-off, making dollar-yen swing a bit.”

The Japanese yen weakened 0.3% to 102.86 per U.S. dollar Tuesday after falling 0.7% Monday.

Moreover, traders are anticipating further tapering as the Federal Open Market Committee will make an announcement Wednesday. While tapering would cut aid, the announcement would further lend support to an expanding U.S. economy.

“The market overreacted in the risk-off move last week and some are taking advantage of good levels to increase risk,” Athanasios Vamvakidis, head of Group of 10 currency strategy at Bank of America Merrill Lynch, said in the article. “Also, although everyone expects the Fed to continue tapering this week, they also expect dovish forward guidance, which will be positive for risk.”

The Japanese is currently trading around its so-called Goldilocks’ range of 100-110, reports William Mallard for Reuters, but Fed tapering, which strengthens the U.S. dollar, and continued Bank of Japan easing, which further weakens the yen, could test the limits. [Japanese Yen ETF Weakens on BOJ Policy Bets]

Some argue that the benefits of a weaker yen will shift to a drawback if the yen depreciates to 120-130 per dollar.

“I don’t think many people in Japan want a yen decline to around 120 or 130 to the dollar,” BOJ economist Nobuyasu Atago said in the Reuters article. “Many companies have already moved production overseas and may also become hesitant to boost exports for political considerations.”